An owner wants to sell her car. Since she knows the car, she knows its precise...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
An owner wants to sell her car. Since she knows the car, she knows its precise quality, denoted by x. However, a potential buyer only knows that comes from a uniform distribution on the unit interval, [0, 1]. The seller is willing to sell quickly at a price not lower than 9x thousand pounds. If is known to the buyer, then the buyer will be willing to buy the car for a price not exceeding 10x thousand pounds. The seller posts a price p and the buyer either accepts or rejects it. If the car is sold, the buyer's payoff is 10x - p, and the seller's payoff is p-9x. If the car is not sold, the payoffs are zero. (Players are risk-neutral; that is, when they face uncertainty, they maximize expected payoff). (a) For what realizations of the seller's type is selling the car efficient? (b) Is there a Perfect Bayesian equilibrium which is efficient (that is, the transaction occurs if and only if it is efficient)? What is the difference between this situation and the First Welfare Theorem? (Maximum two sentences). (c) Find a Perfect Bayesian equilibrium (Hint: pay attention to strategies and the belief system). An owner wants to sell her car. Since she knows the car, she knows its precise quality, denoted by x. However, a potential buyer only knows that comes from a uniform distribution on the unit interval, [0, 1]. The seller is willing to sell quickly at a price not lower than 9x thousand pounds. If is known to the buyer, then the buyer will be willing to buy the car for a price not exceeding 10x thousand pounds. The seller posts a price p and the buyer either accepts or rejects it. If the car is sold, the buyer's payoff is 10x - p, and the seller's payoff is p-9x. If the car is not sold, the payoffs are zero. (Players are risk-neutral; that is, when they face uncertainty, they maximize expected payoff). (a) For what realizations of the seller's type is selling the car efficient? (b) Is there a Perfect Bayesian equilibrium which is efficient (that is, the transaction occurs if and only if it is efficient)? What is the difference between this situation and the First Welfare Theorem? (Maximum two sentences). (c) Find a Perfect Bayesian equilibrium (Hint: pay attention to strategies and the belief system).
Expert Answer:
Answer rating: 100% (QA)
To determine the efficient outcome the sellers type needs to be considered Lets go through the questions step by step a For what realizations of the s... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
Students also viewed these economics questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
1. How strong are the competitive forces confronting J. Crew in the market for specialty retail? Do a [Michael Porter] five-forces analysis to support your answer. (see chapter 3 in the textfor...
-
It has been about 20 years since Julia graduated with a major in aeronautical engineering, and she has been quite successful in her career and her personal finances. Accordingly she wants to sell her...
-
Should common costs be allocated?
-
47. A rectangle has perimeter 20 m. Express the area of the rectangle as a function of the length of one of its sides. 48. A rectangle has area 16 m . Express the perimeter of the rectangle as a...
-
Repeat Prob. 1283 for an isobaric process.
-
Scientific uncertainty about emissions data can be large. The precautionary principle suggests that decision-makers err on the side of caution when there is scientific uncertainty. Examine the data...
-
1. a. Explain why the court concluded that destination skiers at Deer Valley or at Deer Valleys mid-mountain village constitute a market separate from ski rental outlets in nearby Park City. b. How...
-
what is book value, market value and salvage value? i need to know the difference
-
Thompson Distributors packages and distributes industrial supplies. A standard shipment can be packaged in a class A container, a class K container, or a class T container. A single class A container...
-
Using the attached sequences in FASTA format that are ordered indistinctly to the number that species have, a) Choose one of the sequences, perform a Blast with the NCBI resources and with the Expasy...
-
Write a program to read a non negative integer, separates the integer into its digits and prints them separated by tabs each. For example, if the user types in 42339, the program should print: 4 2 3...
-
Algebra review: Y = 804 - 2X What is the value of Y when X is equal to 19? (enter your response as a whole number)
-
Lighting a fire 1. What errors are Allison making as a supervisor? 2. How will you describe Lenora's attitude with respect to her motivation? 3. Is Lenora being insubordinate? Why or why not? 4. What...
-
Summarise the main features of households with financial and mortgage debt by age given in Tables 1a and 1b below and comment on differences between and within age groups over time. Table1a...
-
Express -75 in terms of i Question 1 of 6
-
The following financial statements and additional Information are reported. At June 38 Assets Cash IKIBAN INCORPORATED Comparative Balance Sheets Accounts receivable, net Inventory Prepaid expenses...
-
Tanaka Company's cost and production data for two recent months included the following: March April Production (units).........300................600 Rent.....................$1,800............$1,800...
-
Civil Code 1719, subdivision (a) provides in part that any person who draws a check that is dishonored due to insufficient funds shall be liable to the payee for the amount owing upon the check and...
-
Following a jury trial defendant was found guilty of issuing a bad check, N.J.S.A. 2C:215. * * * She was sentenced to concurrent custodial terms of four years consecutive to any sentence imposed by...
-
Emery Industries (Emery) contracted with Mechanicals, Inc. (Mechanicals), to install a pipe system to carry chemicals and fatty acids under high pressure and temperature. The system required...
-
Marsha Solomon, a physiotherapist, opened a practice. The business completed the following transactions: After these transactions, how much cash does the business have to work with? Use T-accounts to...
-
Refer to Exercise 2-3. Which of the transactions of Marsha Solomon, P.T., increased the total assets of the business? For each transaction, identify the asset that was increased or decreased....
-
Assume that Lululemon Athletica Inc. reported the following summarized data at December 31, 2020. Accounts appear in no particular order; dollar amounts are in millions. Prepare the trial balance of...
Study smarter with the SolutionInn App